The recent Scandinavian Tobacco Group (STG) quarter 3 2024 report offers some intriguing insights into premium tobacco retailers. Here’s a breakdown of the highlights of STG’s recent Q3 report and what it reveals about today’s premium tobacco industry.
- Steady Growth Despite Challenges
STG achieved a 7.1% increase in net sales, totaling DKK 2.4 billion, bolstered by the acquisition of Mac Baren Tobacco Company [read more here]. However, organic growth saw a slight decline of 0.1%. STG attributed this slight decline to factors including the discontinuation of third-party nicotine pouch distribution in the U.S.
- Handmade Cigars: Sales dipped by 1% organically, reflecting a broader U.S. trend of declining consumption post-pandemic highs.
- Machine-Rolled Cigars & Smoking Tobacco: This segment performed better, with 3% organic growth and a boost from Mac Baren’s contributions.
- Handmade Cigars: A Mixed Bag
In the handmade cigar category, U.S. retail superstores reported 14% growth, thanks to new store openings and rising same-store sales.
International markets also showed 4% growth in this segment. Online sales rose 2%, driven by larger basket sizes despite a dip in active consumers.
- Retail Expansion Fuels Growth
STG’s continues to grow its brick-and-mortar retail presence in the U.S.:
- Cigars International added a new superstore in Tennessee and plans two more stores in Florida and Pennsylvania by year-end.
- Same-store sales surged by 11%, highlighting the power of a robust retail strategy.
- Mac Baren Integration: A Strategic Play
The acquisition of Mac Baren Tobacco Company is expected to yield DKK 150 million in synergies by 2027. The addition of Mac Baren’s portfolio strengthens STG’s position in pipe and fine-cut tobaccos category, offering its retail customers another potential revenue stream.
- Cigar Industry Outlook
STG’s Q3 report shows some signs of challenges ahead for the cigar market:
- U.S. consumption of handmade cigars is shrinking by mid-single digits, with no stabilization in sight.
- Machine-rolled cigars in Europe are showing signs of recovery, aided by pricing strategies and increased investments.
Final Thoughts
STG’s Q3 2024 performance highlights both challenges and opportunities for premium tobacco retailers. From retail innovation to the opportunities premium cigars and pipe tobacco still offer retailers, staying adaptable will be critical in capturing growth and navigating shifting consumer behaviors.
You can read Scandinavian Tobacco Group’s entire Q3 report by clicking here.